The Directors are pleased to present to you the 30th Annual Report of CRISIL Limited, along with the audited financial statements, for the year ended December 31, 2016.

Financial Performance

A summary of the Company''s financial performance in 2016:

(Rs. in crore)

Particulars

Consolidated

Standalone

2016

2015

2016

2015

Total income for the year was

1,601.88

1,423.16

1,178.79

1000.70

Profit before depreciation, exceptional item and taxes was

516.23

442.82

414.18

349.38

Deducting depreciation of

40.36

37.12

28.52

24.03

Profit before tax was

475.87

405.70

385.66

325.35

Deducting taxes of

149.53

120.55

130.01

103.35

Profit after tax was

326.34

285.15

255.65

222.00

The proposed appropriations are:

Dividend

192.54

163.77

192.54

163.77

Corporate dividend tax

39.20

33.60

39.20

33.60

General reserve

20.45

22.20

20.45

22.20

Balance carried forward is

74.15

65.58

3.46

2.43

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of The Companies (Accounts) Rules, 2014. There are no material departures from the prescribed norms stipulated by the Accounting Standards in preparation of the Annual Accounts. Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company discloses consolidated and standalone financial results on a quarterly basis which all subjected to limited review and publishes consolidated and standalone audited financial results on an annual basis.

a) Consolidated operations

Revenue from the consolidated operations of your Company for the year was Rs. 1,601.88 crore, 12.56 % higher than Rs. 1,423.16 crore in the previous year. Overall operational expenses for the year were Rs. 1,126.01 crore, against Rs. 1,017.46 crore in the previous year. Operating Profit (EBITDA) improved to Rs. 461.52 crore, against Rs. 399.60 crore, in the previous year. Profit after Tax for the year was Rs. 326.34 crore, against Rs. 285.15 crore in the previous year.

b) Standalone operations

Revenue from the standalone operations of your Company for the year was Rs. 1,178.79 crore, 17.80% higher than Rs. 1,000.70 crore in the previous year. Overall operational expenses for the year were Rs. 793.13 crore, against Rs. 675.35 crore in the previous year. Operating Profit (EBITDA) improved to Rs. 364.98 crore, against Rs. 304.78 crore, in the previous year. Profit after Tax for the year was Rs. 255.65 crore, against Rs. 222.00 crore in the previous year.

A detailed analysis on the Company''s performance, both consolidated and standalone, is included in the “Management''s Discussion and Analysis” Report, which forms part of this Annual Report.

Dividend

The Directors recommend for approval of the members at the Annual General Meeting to be held on April 20, 2017, payment of Final Dividend of Rs. 9 per equity share of face value of Re. 1 each for the year under review. During the year, the Company paid three interim dividends, first interim dividend of Rs. 5, second interim dividend of Rs. 6 and third interim dividend of Rs. 7 per equity share of face value of Re. 1 each. The total dividend for the year shall be Rs. 27 per share on a face value of Re. 1 per share in 2016 as against a total dividend of Rs. 23 per share (including a Special Dividend of Rs. 3 per share) on a face value of Re. 1 per share in the previous year.

Transfer to Reserves

The appropriations for the year are:

(Rupees in crore)

Particulars

Consolidated

Standalone

Year Ended December 31, 2016

Net Profit for the year

326.34

255.65

Balance of Reserve at the beginning of the year

131.87

131.87

Transfer to General Reserve

20.45

20.45

Adjustment on amalgamation

(11.17)

(11.17)

Balance of Reserve at the end of the year

141.15

141.15

Increase in Issued, Subscribed and Paid-up Equity Share Capital

During the year, the Company issued and allotted 1,26,255 equity shares of the Company to eligible employees on exercise of options granted under Employee Stock Option Schemes of the Company. At the end of the year, the issued, subscribed and paid-up capital of the Company was 7,13,35,358 equity shares of Re. 1 each.

Allotment of shares to employees on exercise of options granted under the Employee Stock Option Scheme, 2011, and the Employee Stock Option Scheme, 2012

67, 575

7,12,76,678

Allotment of shares to employees on exercise of options granted under the Employee Stock Option Scheme, 2011, and the Employee Stock Option Scheme, 2012

58,680

7,13,35,358

Capital at the end of the year i.e. as at December 31, 2016

-

7,13,35,358

Review of Operations

A. Ratings

Highlights

- Announced 2,741 new Bank Loan Ratings (BLRs) during the year; total BLRs outstanding exceed 13,264

- Assigned over 18,000 SME ratings and assessments during the year

- Conducted a series of high-profile franchise activities during the year that received wide coverage in media and were also well appreciated by our stakeholders

- Global Analytical Center (GAC) continued to enhance its engagement with S&P Global Ratings in the areas of risk and regulatory support, and further expanded engagement with Platts with increased support in new products and analytics across additional commodity sectors.

Business environment

India''s economic and business environment remained subdued during 2016 due to weak investment climate and muted demand for working capital. On the back of a good monsoon and mild income boost from the Seventh Pay Commission and One Rank One Pension payouts, consumption picked up in the second quarter and it looked like a consumption-led recovery was on the cards for fiscal 2017. However, growth was mildly dented in the third quarter when government demonetized Rs 500 and Rs 1,000 bank notes. Assuming the time that would be taken for full remonetisation, we expect GDP growth to be ~6.9% in fiscal 2017. The immediate channel for deceleration would be a slowdown in consumption demand, leading to a delay in fresh investment plans of corporate. That, in turn, would defer recovery in India''s private investment cycle.

Credit growth of India''s banking sector remained muted at 9% year-on-year as of December 2016. While a good monsoon has improved growth in farm credit, weak corporate credit demand and risk aversion of public sector banks were drags. We expect banks to reduce their lending rates in the near-to-medium term given the abundant systemic liquidity. However, credit growth will remain insipid given subdued consumption and investment demand, and we estimate it at 7-9% for fiscal 2017.

The capital market witnessed an increase in activity in the third quarter of the year due to favourable liquidity and falling yields, which meant bonds were the preferred route to raise funds than bank loans. We believe yield on the 10-year benchmark government security would settle around ~6.8% by March-end fiscal 2017 versus 7.5% in fiscal 2016. Effective liquidity management, reduction in the policy rate by the Reserve Bank of India (RBI), lower inflation, and falling oil prices easing pressure on government borrowings will curb yields. The RBI has also announced measures that would develop and deepen the corporate bond market, enhance participation, facilitate greater liquidity, and improve communication. We believe the measures may take some time to be felt fully, but over the long term they will make a difference.

In 2016, CRISIL''s BLR business witnessed muted growth due to weak credit off take in the manufacturing sector and intensified competition. These factors adversely impacted average realization and volume. While pricing pressures are likely to continue, expected pick up in credit growth and increased risk weights for large unrated exposures could lead to an improved BLR market in 2017.

For CRISIL''s SME Ratings business, calendar year 2016 was a crucial year as consistent engagement with regulators and key decision makers helped in the reinstatement of subsidy support by the Government of India under the NSIC - PCRS (Performance & Credit Rating Scheme). The primary focus of CRISIL SME Ratings for 2016 was to ramp up business volume by increasing capacity, thereby maximizing subsidy share. CRISIL was able to achieve quick and timely ramp-up of manpower by June 2016. One major challenge was navigating low vintage and experience issues across the business development and operations teams. This was addressed through exhaustive training and people development initiatives. Several process realignment initiatives were also undertaken in 2016, which helped to improve key business drivers such as productivity, attrition and operations efficiency. Another challenge emerged in the form of revised regulatory guidelines around client sourcing and documentation, which coupled with pricing pressure posed severe market constraints. Despite the challenging business environment, the SME Ratings business witnessed strong growth in the second half of 2016 and ended the year at a high. However, the SME-business is likely to witness challenges in 2017 owing to significant reduction in the subsidy support under PCRS for 2017-18, which will adversely impact the flagship product - SME NSIC Ratings. To mitigate this, the business is coming up with ambitious technology driven projects to re-engineer business processes, operations and achieve cost optimization, besides instituting a new strategic products cell to sharpen existing products and develop new and relevant market offerings. The medium-to-long term outlook for the MSME sector remains positive, despite potentially adverse short-term effects due to demonetization and the implementation of the Goods and Services Tax regime.

Operations

CRISIL Ratings maintained its market leadership in 2016, backed by strong performance in bond ratings and SME ratings businesses. CRISIL announced 2,741 new BLRs and 18,000 SME ratings during the year. It has, to date, assigned more than 25,000 BLRs and over 110,000 SME ratings/assessments. This year, SME ratings/ assessments were focused on newer geographies such as the north-east. The business also added clients from hinterland in north and south India.

In 2016, we rated India''s first hybrid issuance in the insurance sector. This was first subordinated debt instrument in the Indian market by an insurance company. We also released the rating criteria for hybrid instruments issued by insurers, the first of its kind in India. We also rated the largest annuity-based road project in 2016. Further, CRISIL assigned a rating on India''s first Infrastructure Investment Trust (InvIT). All these innovations were well received by the market, and are seen as significant milestones in deepening the corporate bond market in India.

CRISIL Ratings also held the 4th edition of its annual bond market seminar, the theme of which was ''Corporate Bonds & India''s New Financial Order''. The highlight was a keynote address by Shri Jayant Sinha, former Minister of State for Finance, Government of India. Shri Sinha also launched The CRISIL Yearbook on the Indian Debt Market, 2015, at the event. In addition, we had a power-packed panel moderated by Smt Usha Thorat, former Deputy Governor of the RBI, on regulatory facilitation for India''s corporate bond market. The participants were from the RBI, the Pension Funds Regulatory Development Authority, SEBI and the Insurance Regulatory Development Authority. Our analysis was well received by all stakeholders including regulators and policy makers. We successfully hosted a discussion forum on the non-banking finance company (NBFC) sector under the ''Fin Insights'' umbrella, where we discussed trends and perspectives on key topics pertaining to NBFCs like housing finance, structured credit, real estate financing, SME financing, loan against property, etc. The seminar included a line-up of prominent NBFC industry leaders as panelists and received promising feedback on the content and execution of the event.

We have developed a structured and sustained platform named ''CRISIL Ratings Conclave'' for our senior management to deepen relationships with existing clients and create differentiation with prospective clients across various locations beyond metros. This is designed as a select forum to drive closer client conversations and engagements.

High-impact franchise activities during 2016 included seminars on the power sector and India Outlook for Fiscal 2017 jointly with CRISIL Research team, web conferences on the telecom, road and agrochemical sectors, apart from press releases on securitization, banking, etc. We were also the speaker and knowledge partner in various conferences and summits. These outreach efforts were well received from by key stakeholders including clients and investors.

GAC continued to work closely with S&P Global Ratings, growing in new areas of support such as risk management and regulatory support, including assistants on criteria validation, operational and documentation support for control functions, while increasing the level of integration with S&P Global Ratings teams globally. GAC also expanded support to previously under-served geographical segments including Latin America and Japan.

With the evolving global regulatory requirements, GAC continued its focus on strengthening its internal controls framework in collaboration with S&P Global Ratings'' control functions. GAC''s culture of continuous improvement has created ongoing efficiency gains for S&P Global Ratings through lean management tools, work standardization and process re-engineering.

GAC also initiated new support for S&P Global Ratings in the newly formed functions and extending support in Platts to their recently acquired businesses. .

B. Research

B.1. Global Research & Analytics (GR&A)

Highlights

-Financial Research built a strong base on the buy-side and credit business segment driven by new opportunities arising out of the changing regulatory environment

- Risk & Analytics reported another year of very strong business growth with both new and existing customers, and witnessed good traction with newer offerings launched to help banks meet various regulatory mandates

- Corporate Research added several new logos across core sectors

- Coalition had very strong results driven by the expansion of existing clients and the diversification of new clients, coupled with increased brand and media dominance.

- In Data Analytics, we made good progress in delivering analytical solutions and innovative products and solutions to our customers in the buy side and sell side

Business environment

Calendar 2016 was another year of subdued growth for the global economy. As a result, the size of the investment banking industry has reached its lowest level since the global financial crisis of 2008-09 with fixed-income revenue at the same level as in 2005. Banks are also transforming their front, middle and back-office activities to provide differentiated services, achieving cost efficiencies and increasing productivity. This is opening up a number of business opportunities for the Risk & Analytics business. Increasing regulatory changes continues to drive strong growth for CRISIL GR&A, especially in the Risk & Analytics vertical, and Coalition.

The Coalition IB Index tracked the performance of the top 12 global investment banks. The results for 2016 show that overall, the index performance is down 2% year-on-year. Equity revenue has decreased 12%, while those from investment banking (from merger & acquisition activity), and debt and equity markets, have decreased 8%. However, Fixed Income Currency and Commodities (FICC) revenue has increased 9%.

Index Revenue Trend

In Financial Research, we have added clients across new business segments on the buy side and in credit risk. The imminence of the Markets in Financial Instruments Directive II (MiFiD II) regulations, and increased cost pressure is stoking demand for our services on the buy side, especially from traditional managers and hedge funds. Our sell-side business witnessed demand from the Asia-Pacific region from existing clients. Our Credit Risk business gained from new opportunities related to risk management, deal screening and underwriting, and portfolio monitoring from global financial services clients.

The Risk & Analytics business continued to witness strong demand in the areas of stress testing, model validation, regulatory change management, and financial crime and compliance analytics. In addition to the now mature US regulations such as the Comprehensive Capital Analysis and Review (CCAR) and the Dodd-Frank Act Stress Testing (DFAST) newer regulations such as the Fundamental Review of the Trading Book (FRTB), International Financial Reporting

Standards 9 (IFRS 9), Current Expected Credit Loss Standard (CECL), and Interest Rate Risk in the Banking Book (IRRBB) are also gaining momentum. We are also experiencing substantial interest for our services by banks and financial institutions to provide support for risk data aggregation, and for up gradation of risk systems and processes.

In Corporate Research, our clients continued to face cost pressures and loss of business opportunities, while witnessing increased focus on innovative sales approaches to enable new business. We added several new logos during the year, in addition to reviving a few dormant clients, which helped maintain our revenues.

In Data Analytics, we added new logos for our services on both the buy and sell sides. As analytics becomes more mainstream, we see demand for support, training and consulting assignments on visualization, digital analytics and advanced analytics. There exist opportunities for integration of unstructured data into investment decision making, and analytics solutions for end clients to quickly validate and test assumptions and hypothesis.

- all of which has enhanced our competitiveness. We have significantly increased our market presence, which buoyed growth in a tough business environment. We also undertook several thought leadership initiatives in the area of changing regulations and its impact on asset managers, which received excellent response and reinforced our position as an industry leader. Our global research centers continue to scale up, with International Centers benefiting from regulation-driven-change mandates, and China building on its growth momentum due to increased demand for Asia research support.

In Risk & Analytics, investments of the previous years have started to yield results in newer areas such as financial crime and compliance analytics, FRTB and IFRS9/CECL. The past year witnessed expansion of our business across all geographies, successful conversion of some strategic prospects, and good progress on the productisation agenda. We are actively investing in our human capital and grooming in-house talent to make them industry ready through a planned series of comprehensive training programs in line with the evolving landscape of the financial services and risk industry.

In Corporate Research, while we continued to add large corporations to our clientele, we also added several medium-size entities in our client portfolio - who are requesting analytics-driven research support that provide tangible results - to deal with the challenging business environment they are currently facing.

Coalition delivered strong results, driven by its core Competitor and Client Analytics, which continued to report solid growth. In 2016, 75% of Coalition''s existing corporate and investment bank clients significantly increased their investment in our services. In addition, Coalition diversified its client base by establishing new relationships with regional and national players as well as buy-side firms. This expansion is testimony to the trust and increasing reliance in Coalition''s high-quality analysis and insight across the financial services industry. Its media strategy added new publications covering corporate and investment bank analysis to reflect the growing collaboration between the two. The team has also delivered very good results, leading to an estimated media market share above 50%. In Data Analytics, we have invested in expanding our team and capabilities. We are focusing on training, and learning and development opportunities to enable up skilling.

B.2. India Research Highlights

- Maintained our dominant and premium position in the flagship Industry Research business

- Witnessed healthy revenue growth in the Customized Research business on the back of significant traction in the automobiles, energy and commodity sectors

- Remained the largest provider of fixed-income indices in India and consolidated our position by launching seven new indices during the year

- Significantly stepped up engagement with regulators and industry associations.

Business Environment & Operations

Despite sharp increase in banks'' non-performing assets and resultant pressure on profitability, which impacted research expenditure, subscription rates remained healthy, indicating the criticality and value of our research products and services. Apart from ongoing coverage on 86 sectors, we launched many special reports in areas such as on NBFCs, SMEs, agriculture and, for the first time, on railways given the strong investment focus of the government. After two years of slowdown, the Customized Research business witnessed healthy revenue growth on the back of significant traction in the automobiles, energy and commodity sectors. Continued high proportion of repeat business from Indian and global clients, and increase in average ticket size of mandates improved the performance.

In the Fixed Income Research business, we further consolidated our strong position in the valuation space by winning mandates from general insurers and corporate in 2016. We continued to be the largest provider of fixed-income indices in India and consolidated our position by launching seven new indices during the year. In the mutual fund research, we increased our presence with corporate treasuries and exempted provident fund trusts, helping them in portfolio performance review and risk monitoring.

The Executive Training business saw robust growth over the previous year. We launched our first multi-level certification programme on a customized basis. Increase in banks'' and regulators'' focus on enhancing credit and risk domains skills is likely to provide strong tailwinds, driving growth of the training business in the medium term.

Franchise

The CRISIL Centre for Economic Research (C-CER) and the CRISIL Research businesses continued to focus on franchise and thought leadership activities by conducting distinctive research on contemporary issues. We published several landmark reports during the year, covering a wide spectrum of areas such as the distress in the rural economy, impact of remittances and deficient rains, trade deficit with China, impact of GST, quality of India''s growth, impact of Brexit, the ''Make in India'' programme, and demonetization. C-CER and CRISIL Research speakers participated in over 27 leading industry conferences and panel discussions, and hosted 11 events/ webinars on a variety of topics. CRISIL Research participated as a knowledge partner and presented a report on the pension sector at ASSOCHAM''s National Conference on Social Security and The Role of Equity Market.

C. Infrastructure Advisory and Risk Solutions

CRISIL conducts its infrastructure advisory and risk solutions business through its subsidiary, CRISIL Risk and Infrastructure Solutions Limited (CRIS).

C.1. CRISIL Infrastructure Advisory Highlights

- Supported Government of India''s flagship programmes such as Smart Cities Mission, Power for All/ Ujwal Discom Assurance Yojana (UDAY), Roads and Indian Railways, and infrastructure financing

- Successfully built a strong order book with several large mandate wins

Business environment

India''s infrastructure sector is at the threshold of significant transformation. The government has launched several new programmes and policy initiatives that have the potential to provide inclusive infrastructure to citizenry. The investment climate has, however, not yet picked up, and infrastructure financing continues to remain a key challenge. The private sector, which was expected to play a key role in infrastructure development, remains wary of investments. The global economic situation has also not improved, amid continued concerns over recovery.

The government has launched quite a few large and visionary programmes, and has committed to take up the lion''s share of investments. However, full-scale implementation is yet to be seen. How quickly the government is able to roll out various reforms and implement them remains the key.

The business is also involved closely with infrastructure development in emerging markets in Africa and South / southeast Asia. During the year, the business environment and infrastructure development in these international markets was muted.

Operations

CRISIL Infrastructure Advisory started the year slowly, but picked up momentum in the second half of the year. We won several large and prestigious mandates in India and in emerging markets as well. This helped the business to build a robust order book that is significantly larger than before. Revenue growth was steady during the year.

Our focus on government and multilateral agencies as clients continued, as we supported several flagship programmes of the government. During the year, the business was successful in deepening its foray into large multi-year implementation support mandates with government programmes - an important defined strategic pursuit area.

We worked closely with the Ministry of Power in preparing the roadmap for ''24x7 Power for All by 2019'' for 15 states and union territories, and are now supporting one of the state governments in monitoring and implementation of UDAY and Power for All schemes. We deepened our involvement in the downstream gas sector, as well as renewable energy sector by winning a few prestigious mandates during the year, including review and evaluation of the National Solar Mission.

We expanded our involvement in the Smart Cities Mission by supporting a few more cities in the second round of proposals, and are proud of the fact that barring one, all the cities we supported in the proposals round have been selected by the Ministry of Urban Development to be developed as Smart Cities. We also won a large implementation support mandate in one of the cities.

The roads sector saw a lot of action during the year, and CRISIL Infrastructure Advisory is involved with the National Highways Authority of India on some prestigious projects, including the proposed monetization of operational projects under the toll-operate-transfer model. We also worked on a first-of-its-kind mandate for the Indian Railways to set up a development fund to draw private and foreign capital to the sector.

The international business for CRISIL Infrastructure Advisory was relatively muted during the year, given the sluggishness in the emerging markets we targeted. However, the business won a few prestigious mandates in Africa and successfully tapped and deepened involvement in the Mekong region of south-east Asia with large mandates in Vietnam, Laos and Cambodia.

C.2. CRISIL Risk Solutions (CRS) Highlights

- Continued to consolidate the business, while stabilizing products for efficiencies

- Saw good traction for the business from non-banking clients in India

- Continued expansion of footprint in south Asia, the Middle East and other new geographies by increasing collaboration with S&P Global

Business environment

The business environment in India has improved significantly with favourable policies on financial inclusion and easing stress on credit quality in the banking industry. With increased focus on strengthening credit risk management and monitoring, demand from banks for our Early Warning System (EWS) and Credit Processing System (CPS) remains strong. Momentum in CRS''s rating solution continues in India with small banks and NBFCs showing keen interest in moving to a system-based solution for internal ratings. CRS''s non-product service business is also showing good momentum and would be a key growth driver in the next couple of years. We recently executed our first mandate in the risk services space for a leading NBFC in India. In the international market, especially the Middle East, momentum is building around the need for a credit monitoring tool. Though there is good traction in the market, conversions are key to growth next year.

Operations

The year saw consolidation with continued investments in our products for building sustainable business and ensuring efficiencies in implementation. Process, people and products remain the key imperatives for the business.

The second half of the year witnessed increased traction in the NBFC space for adopting improved risk practices, leveraging on our strong risk and credit expertise. We expect the momentum to continue next year as well. CRS took efforts to build outreach in the international market for developing a strong pipeline.

We continued to build our franchise through webinars and knowledge-sharing sessions in India and abroad. CRS conducted seminars in Dubai and Kuwait, focusing on increased credit monitoring by an early warning framework, implementation challenges and industry best practices. CRS also organized a web conference discussing practical, real world challenges related to effective credit assessment of MSMEs and alternative approaches to overcome difficulties.

CRS expects to build on its current momentum, expanding footprints in the non-banking space and global markets in 2017.

D. Collaboration with S&P Global

In 2016, we deepened our engagement with S&P Global for outreach initiatives in different geographies. We collaborated with S&P Global on a seminar under the annual flagship platform, India Credit Spotlight. The theme for the seminar was ''India and China: Fighting the Growth War on Different Battlegrounds''. The event was appreciated by investors and issuers alike. As part of our joint outreach initiatives, we organized a lecture by Paul Sheared, Executive Vice President and Global Chief Economist, S&P Global, on his visit to Mumbai. The lecture was organized in collaboration with the Asia Society chapter in India. We also organised a breakfast meeting for S&P Global Asia-Pacific Chief Economist Paul Gruenwald on Chinese rebalancing and its implications. CRISIL''s Chief

Economist Dharmakirti Joshi participated as a panelist in the Global Economic Outlook Conference in New York and also in a webinar on the same topic. He also moderated the leadership panel (on innovation, exploration and India''s growth trajectory) at S&P Dow Jones Indices'' annual thought leadership seminar, ''Is India''s Tomorrow Here Today,'' held in Mumbai.

C-CER continued to provide outlook on the Indian economy to S&P Global and contributed an article on prospects for the Indian economy along with an article on India''s policy focus on the manufacturing sector to a Platt''s publication. CRISIL Research hosted a webinar titled ''Steel - Is it the inflection point or a mirage?'' with participation from a senior sector specialist from Platts. Further, CRISIL''s expert participated in a panel discussion titled ''Is there a global solution to anti-dumping issues?'' at Platts'' Steel Conference held in Mumbai. CRISIL also presented on the Indian sugar industry''s financial position and outlook at Kingsman Asia Sugar Conference held in Delhi.

Risk Solutions business continued to engage with S&P Global Market Intelligence to promote its offerings in the areas of credit risk assessment for banks and financial institutions across emerging markets.

CRISIL Research started collaborating with S&P Global for cross-selling its products through the S&P Global Market Intelligence platform.

E. Human Resources

CRISIL''s Human Resources agenda made significant advancements in calendar 2016. At the closure of its financial year, CRISIL''s headcount was 3,972 including in all wholly owned subsidiaries.

Highlights

Employee engagement level moved upward significantly over the last year benchmarks. Empowerment and ownership of middle management helped immensely in talent engagement and retention. Diverse talent programmes were implemented flawlessly and with due spirit that will help us in long run.

We invested heavily in newer technologies, which would not only provide superior experience but also more control to the employees.

Leadership development, succession planning and other organizational development interventions got a relook in line with CRISIL''s long-term strategy. Specific development focused interventions were implemented for the leadership team. A structured job evaluation and career management framework was implemented to facilitate career planning and job rotation. We imparted 2,044 man-days of diverse training to employees during the year.

With a focus on improving employee benefits, a number of programs were rolled out to be able to stay ahead of the market.

Segment-Wise Results

The Company has identified three business segments, in line with the Accounting Standard on Segment Reporting (AS-17), which comprise: (i) Ratings, (ii) Research and (iii) Advisory. The audited financial results of these segments are provided as a part of financial statements.

Directors

The members of the Board of Directors of the Company are eminent persons of proven competence and integrity. Besides having financial literacy, experience, leadership qualities and the ability to think strategically, the Directors have a significant degree of commitment to the Company and devote adequate time for the meetings, preparation and attendance. Board members possess the education, expertise, skills and experience in various sectors and industries required to manage and guide the Company.

The Policy of the Company on Directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section (3) of Section 178, is appended as Annexure I to this Report.

Directorship changes

Mr. Yann Le Pallec resigned as Director of the Company on July 19, 2016. Your Directors place on record their sincere appreciation of his valuable support and guidance to the Board and the Company during his tenure as a Director, especially recognising his engagement with and contributions to the Risk Solutions and Advisory businesses of CRISIL, as a director of our subsidiary, CRISIL Risk and Infrastructure Solutions Limited.

Mr. John Francis Callahan Jr. resigned as Director of the Company on July 19, 2016. Your Directors place on record their sincere appreciation of his valuable support, strategic insights and guidance provided to the Board and the Company during his tenure as a Director, especially, his involvement and constructive inputs during the CRISIL Strategy exercise.

The Board of Directors appointed Ms. Martina L. Cheung and Mr. John L. Berisford as Additional Directors of the Company with effect from July 19, 2016. Ms. Cheung and Mr. Berisford hold office as Additional Directors until the ensuing Annual General Meeting, and are eligible for appointment as Directors as provided under Article 129 of the Articles of Association of the Company. The Company has received notices under Section 160 of the Companies Act, 2013 from a member signifying her intention to propose the candidature of Ms. Martina Cheung and Mr. John L. Berisford for the office of Directors. A brief profile of Ms. Martina Cheung and Mr. John L. Berisford has been given in the Notice convening the Annual General Meeting.

In accordance with the Articles of Association of the Company and the provisions of the Companies Act, 2013, Mr. Douglas Peterson retires by rotation and being eligible, seeks reappointment.

Board Independence

Our definition of ''Independence'' of Directors is derived from Regulation 16(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent:

a) Mr. H. N. Sinor

b) Dr. Nachiket Mor

c) Mr. M. Damodaran

d) Ms. Vinita Bali

Committees of the Board

There are currently five Committees of the Board, as under:

- Audit Committee

- Corporate Social Responsibility Committee

- Investment Committee

- Nomination and Remuneration Committee

- Stakeholders'' Relationship Committee

Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the “Report on Corporate Governance”, a part of this Annual Report.

Number of Meetings of the Board

The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other Board business. The Board / Committee Meetings are prescheduled and a tentative annual calendar of the Board and Committee Meetings is circulated to the Directors well in advance to help them plan their schedule and to ensure meaningful participation in the meetings. However, in case of a special and urgent business need, the Board''s approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting.

The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held in Mumbai. The Agenda of the Board / Committee meetings is circulated at least seven days before the date of the meeting. The Agenda for the Board and Committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision.

The Board met four times in financial year 2016 viz., on February 9, April 19, July 19 and October 14. The maximum interval between any two meetings did not exceed 120 days.

Annual Evaluation by the Board

During the year, the Board has carried out the annual evaluation of its own performance as well as the evaluation of the working of its Committees and individual Directors, including Chairman of the Board. This exercise was carried out through a structured questionnaire prepared separately for Board, Committees, Chairman and individual Directors. The performance evaluation of the Chairman was also carried out by the Independent Directors at a separate meeting of the Independent Directors. The questionnaire and evaluation process was reviewed in the context of SEBI Guidance Note on Board evaluation dated January 5, 2017 and necessary alignment was made with the requirements.

The questionnaire for Board evaluation was prepared taking into consideration various aspects of the Board''s functioning such as Board structure, understanding of Board members of their roles and responsibilities, Board meeting and reporting process, time devoted by the Board to Company''s long-term strategic issues, quality and transparency of Board discussions, quality, quantity and timeliness of the information flow between Board members and management, Board''s effectiveness in disseminating information to shareholders and in representing shareholder interests, Board information on industry trends and regulatory developments and discharge of fiduciary duties by the Board.

Committee performance was evaluated on the basis of their effectiveness in carrying out their respective mandates.

Peer assessment of Directors, based on parameters such as participation and contribution to Board deliberations, ability to guide the Company in key matters and, knowledge and understanding of relevant areas were received by the Board for individual feedback.

The Board acknowledged key improvement areas emerging through this exercise and action plans to address these are in progress.

During 2016, the Company also auctioned the feedback from the Board evaluation process conducted in the previous year, i.e. 2015. Suggestions were incorporated in strengthening the Board review calendar plan for 2016 with thematic additions on people matters & succession planning as well as increased frequency of review of regulatory developments and strategy. Special sessions were conducted throughout the year, for the senior management and Board members, by internal and external speakers, including some industry leaders. Perspective on markets, economy, corporate governance trends and public policy shared during these sessions, helped contextualizing the budgeting and strategy exercises of the Company. Attending

Board meetings allowed increased interaction between the senior management and the Board.

Risk Management Policy and Internal Control Adequacy

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. For ensuring independence of audits, the Internal Auditors report to the Audit Committee. Both Internal and Statutory Auditors have exclusive executive sessions with the Audit Committee on a regular basis. In addition, the Management performs a review of key controls impacting financial reporting, at entity as well as operating levels.

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives which has been enhanced during this year. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. These have also been reported and discussed in detail in the Management''s Discussion and Analysis Report, annexed to this report.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and the reviews performed by management and the relevant board committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls with reference to Financial Statements were adequate and effective during financial year 2016.

Directors’ Responsibility Statement

Your Directors hereby confirm that:

i. i n the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

ii. t hey have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Material Changes and Commitments Affecting the Financial Position of the Company

There have been no material changes and commitments, affecting the financial position of the Company that have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

The particulars regarding foreign exchange earnings and outgo appear as separate items in the notes to the Accounts. As such, the Company does not own any manufacturing facility and hence our processes are not energy intensive. Hence particulars relating to conservation of energy and technology absorption stipulated in the Companies (Accounts) Rules, 2014 are not applicable.

However, CRISIL is supportive of the cause of environment protection and has taken measures to reduce its carbon footprint. Some of these measures are as follows:

a) We organize workplaces such that maximum day light is used in work areas, reducing artificial illumination

b) Motion sensors are used for automatic switching on/off of lights to conserve energy

c) The air-conditioning equipment is operated through a building monitoring system, which ensures that the units are switched on or off based on occupancy

d) Recycled water through sewerage treatment is used for gardening purposes

e) We have initiated a project for converting wet waste into compost for horticultural use

We have rolled out a policy which aims at improving environmental performance of CRISIL. The policy is our commitment to be environmentally responsible and encouraging our employees and members of the wider community to work for the environment by setting and monitoring environmental objectives, making efficient use of natural resources, eliminating waste and promoting recycling of resources.

In addition, under the CRISIL Re. employee volunteering program, CRISIL leverages its workforce as agents of change to drive environment conservations actions. These include tree plantation initiatives, green cover maintenance activities, installations of solar-powered lamps for renewable electricity to disadvantaged communities and waste management solutions for the urban poor. Details of the outcomes from these initiatives during 2016 are given in the Corporate Social Responsibility Report published elsewhere in the Annual Report.

Corporate Social Responsibility

The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The role of the Committee is to review the CSR Policy, indicate activities to be undertaken by the Company towards CSR and formulate a transparent monitoring mechanism to ensure implementation of projects and activities undertaken by the Company towards CSR.

The CSR Policy of the Company and further details about the initiatives taken by the Company on Corporate Social Responsibility during the year under review have been appended as Annexure II to this Report.

Vigil Mechanism

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

Subsidiary Companies

As on December 31, 2016, the Company had one Indian and seven overseas wholly owned subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary companies is also included in the Annual Report.

The Company has no associate companies within the meaning of Section 2(6) of the Companies Act, 2013.

In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company, www.crisil.com. Further, as per fourth proviso of the said section, audited annual accounts of each of the subsidiary companies have also been placed on the website of the Company, www. crisil.com. Shareholders interested in obtaining a copy of the audited annual accounts of the subsidiary companies may write to the Company Secretary at the Company''s registered office.

The Company has obtained a certificate from the Statutory Auditors certifying that the Company is in compliance with the FEMA Regulations with respect to downstream investments made in its subsidiary companies as operating during the year.

Merger of Wholly Owned Subsidiaries with the Company

In order to improve operating efficiencies, the Board of Directors of the Company in their meeting held on October 17, 2015, after considering the recommendations of the Audit Committee, approved the amalgamation of its three wholly owned subsidiary companies viz., Pipal Research Analytics and Information Services India Private Limited, Coalition Development Systems (India) Private Limited and Mercator Info-Services India Private Limited, with the Company through a Scheme of Amalgamation (Scheme) under Section 391/394 of the Companies Act, 1956, as reported in the previous year''s Directors'' Report.

A Scheme of Amalgamation filed with the Hon''ble High Court of Bombay was duly approved by the High Court and the said Scheme became effective on October 25, 2016, with April 1, 2016 as the appointed date. Being wholly owned subsidiaries of the Company, the entire paid-up share capital of Pipal Research Analytics and Information Services India Private Limited, Coalition Development Systems (India) Private Limited and Mercator Info-Services India Private Limited has been cancelled and the companies stand dissolved without winding up and as a result, these three have ceased to be subsidiaries of the Company.

Particulars of Contracts or Arrangements with Related Parties referred to in Section 188(1)

A significant quantum of related party transactions undertaken by the Company is with its subsidiary companies engaged in product delivery of CRISIL businesses and business development activities. The Company has also been providing analytical support to S&P Global entities as a part of a Master Services Agreement, which transaction has been approved by the shareholders though a resolution passed by postal ballot on December 15, 2014.

The Audit Committee pre-approves all related party transactions. The details of the related party transactions undertaken during a particular quarter are placed at the meeting of the Audit Committee held in the succeeding quarter.

All contracts / arrangements / transactions with related parties that were executed in 2016 were in the ordinary course of business and at an arm''s length. During the year, there were no related party transactions which were materially significant and that could have a potential conflict with the interests of the Company at large. All related party transactions are mentioned in the notes to the accounts. The particulars of material contracts or arrangements with related parties referred to in Section 188(1), is given in prescribed Form AOC - 2 as Annexure III.

As required under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Related Party Transactions Policy, which has been put up on the website of the Company at http://www.crisil.com/investors/ corporate-governance.html. The Company has developed an operating procedures manual for identification and monitoring of related party transactions.

Particulars of Loans, Guarantees or Investments under Section 186

Details of loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are provided in the Notes to Financial Statements.

Auditors’ Appointment

At the 28th Annual General Meeting of the Company, the Statutory Auditors, S. R. Batliboi & Co. LLP, Chartered Accountants, were appointed for a term of two years until the conclusion of the 30th Annual General Meeting.

In view of the mandatory requirement for rotation of auditors upon completion of 10 years of association with a company, in terms of Section 139 of the Companies Act, 2013, S. R. Batliboi & Co. LLP will retire as Company''s Auditors at the conclusion of the ensuing 30th Annual General Meeting. It is proposed to appoint M/s. Walker Chandiok & Co LLP as the new Statutory Auditors of the Company. M/s. Walker Chandiok & Co LLP (an affiliate of Grant Thornton India LLP) are proposed to be appointed for a period of 5 continuous years i.e. from the conclusion of 30th Annual General Meeting till the conclusion of 35th Annual General Meeting of the Company. M/s. Walker Chandiok & Co LLP, have informed the Company that their appointment, if made, would be within the limits prescribed under Section 141 of the Companies Act, 2013. M/s. Walker Chandiok & Co LLP have confirmed that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold valid certificates issued by the Peer Review Board of the ICAI. M/s. Walker Chandiok & Co LLP, have also furnished a declaration in terms of Section 141 that they are eligible to be appointed as auditors and that they have not incurred any disqualification under the Company Act 2013. A brief profile of the Auditors is provided in the Notice of the Annual General Meeting.

The Board recommends appointment of M/s. Walker Chandiok & Co LLP as Statutory Auditors of the Company from the conclusion of 30th Annual General Meeting up to the conclusion of 35th Annual General Meeting of the Company, subject to ratification at every Annual General Meeting.

Secretarial Audit Report

The Board of Directors of the Company has appointed Dr. K. R. Chandratre, Practicing Company Secretary, to conduct the

Secretarial Audit and his Report on Company''s Secretarial Audit is appended to this Report as Annexure IV.

Comments on Auditors’ Report

There are no qualifications, reservations or adverse remarks or disclaimers made by S. R. Batliboi & Co. LLP, Statutory Auditors, in their report and by Dr. K. R. Chandratre, Company Secretary in Practice, in his secretarial audit report.

The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

Management’s Discussion and Analysis Report

The Management''s Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to this report.

Corporate Governance

The Company is committed to maintaining the highest standards of Corporate Governance and adhering to the Corporate Governance requirements as set out by Securities and Exchange Board of India. The Report on Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. A Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also published elsewhere in this Annual Report.

Particulars of Remuneration

Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of Companies Act, 2013 read with Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been appended as Annexure V to this Report.

In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of every employee covered under the said rule are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder upon request.

The Nomination and Remuneration Committee of the Company has affirmed at its meeting held on February 10, 2017 that the remuneration is as per the remuneration policy of the Company.

Employee Stock Option Schemes

The Company has three employee stock option schemes. The Employee Stock Option Scheme - 2011 (ESOS 2011) was approved by the shareholders vide a special resolution passed through postal ballot on February 4, 2011. The Employee Stock Option Scheme - 2012 (ESOS 2012) was approved by the shareholders vide a special resolution passed through postal ballot on April 10, 2012. The Employee Stock Option Scheme - 2014 (ESOS 2014) was approved by the shareholders vide a special resolution passed through postal ballot on April 3, 2014. In terms of the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014, approval of shareholders is sought for modification of Employee Stock Option Scheme - 2014 with the objective of utilizing the stock option pool more effectively by revising the exercise price. Accordingly, a special resolution has been included in the Notice of 30th Annual General Meeting accompanying this report.

During 2016, there were no material changes in the Employee Stock Option Schemes (ESOS) of the Company and the Schemes are in compliance with the SEBI Regulations on ESOS. As per Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 read with SEBI circular dated June 16, 2015 the details of the ESOS are uploaded on the Company''s website http://www.crisil.com/pdf/investors/Detail-of-ESOS-31st-Dec-2016.pdf in terms of Circular No CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 issued by Securities and Exchange Board of India.

Extract of Annual Return

The Extract of Annual Return as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-9 of the rules prescribed under Chapter VII relating to Management and Administration under the Companies Act, 2013 is appended as Annexure VI.

Deposits

The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

Litigations

During the year under review, there were no significant or material orders passed by any regulatory / statutory authorities or courts / tribunals against the Company impacting its going concern status and operations in future.

Financial Year

The Company and all its subsidiary companies, in India and across the world, follow the calendar year as the financial year in terms of a special approval obtained from the Company Law Board in 2015.

CEO and CFO Certification

Certificate from Ms. Ashu Suyash, Managing Director & CEO and Mr. Amish Mehta, Chief Financial Officer, pursuant to provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the year under review was placed before the Board of Directors of the Company at its meeting held on February 11, 2017.

Acknowledgements

The Board of Directors wishes to thank the employees of CRISIL for their exemplary dedication and the excellence they have displayed in conducting the operations of CRISIL. The Board also wishes to place on record its sincere appreciation of the faith reposed in the professional integrity of CRISIL by customers and investors who have patronized its services. The Board acknowledges the splendid support provided by market intermediaries. The affiliation with S&P Global has been a source of great strength. The Board of Directors also wishes to place on record its gratitude for the faith reposed in CRISIL by the Shareholders, Securities and Exchange Board of India, the Reserve Bank of India, the Government of India and the state governments. The role played by the media in highlighting the good work done by CRISIL is deeply appreciated.

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